The rise of cheap tech combined with smart people being laid off
during the recession has led to a wave of startups trying to
re-imagine everything from lending to wealth management, using
technology to do things faster, better, and cheaper.

Business Insider: What, for you, is the most interesting
part of fintech at the moment?

Jan Hammer: We spent a lot of time trying to slice and dice the
system. You may have seen those infographics that split the
financial services industry into silos. They really go by
category — savings, foreign exchange, lending, and so forth.
Those oversimplify what's happening in the sector.

We at Index try to think about what are the next generation of
companies and we try to think about it in different dimensions.
Are we trying to serve the banks, are we trying to play other
players in the system on a B2B basis, or are we trying to cater
to the consumer.

Just to pick a few examples: will the consumer want their
dedicated FX or savings all in one place or will they want
something more integrated?

It's oversimplifying to say, 'We're a new lending startup, banks
aren't lending so therefore we're going to be the winners.'

The second interesting question is how the business world and the
consumer world intersect. Under the hood of a bank you've got
operations, compliance — lots of very legacy, old technology. But
in many cases the consumer businesses just have a front end. So
does one start selling that service to the other? Or should we be
thinking: can we create companies that provide a common service
layer across these very complex functions?

On the business side — are there propositions that go all the
way? Are there companies that can truly replace the
existing models, whether they're banks or something else.
But again, I think it's oversimplifying to say, 'We're a new
lending startup, banks aren't lending so therefore we're going to
be the winners.'

I would argue that fintech presents a huge opportunity.
Incumbents have not delivered or broken promises and not kept up
with consumers. I'd also argue that banks are not going to
disappear tomorrow.

BI: What do you think will happen then? Do you think
banks will work with some of these startups? Or there'll be an
ecosystem big enough for everyone to get on without destroying
each other?

JH: I can't predict the future, but I would guess that we're
going to get a mixture of all.

We're going to get some that act as the Amazon Web Services —
some of those banks may transform to provide that or it may be
newcomers. Not just hosting and infrastructure. One that applies
to all fintech startups is KYC [know your customer] compliance.

If you think about it, there's a huge amount of duplication.
You're sending your utility bill to TransferWise but also Funding
Circle — maybe there's an argument for an industry wide platform.

BI: So finance as a service, in the same way we've seen
with software?

JH: For example. The other thing is there may be a certain amount
of convergence between the new startup world and the banking
system. There may also be, and we're already seeing this,
convergence between the new startups. Ambitious entrepreneurs are
saying I'm in this category, what's the next category?

JH: They're certainly one of those innovative companies. They
include two trends that I've mentioned — one is the Amazon model,
and the other is the new service aggregated provision model. They
either provide it out as a service, as you say, or they have
their own customers and say, 'Come to the supermarket! On our
platform, we host all these different products and services.'

BI: More broadly, what's Index interested in at the
moment?

JH: I guess more generally one of the huge trends is data and
information. What's happening: the world is more mobile, you've
got a shift in adoption where a lot of new products and services
are adopted by the millennial generation, and, as a result, lives
are far more online than offline. All that traffic and
interaction is creating a lot of data and information. But
the question is, what do you do with it?

Recently we made an investment in a company called Collibra, a
software company. This is a global business out of Brussels and
it sells what they call data governance
software.

All that traffic and interaction is creating a lot of data and
information. But the question is, what do you do with
it?

Collibra is the librarian that organises the library cards for
your data set — where do I find this data, who can use it, who
created it. We think there's a big future for companies like that
which sit on top of the exhaust of data.

Even more broadly, it's this mobile representation of everything
we do, very often aimed at the millennial generation. Whether
it's the sharing economy, whether it's the way we purchase or
exchange goods and services — food ordering, transportation.
Making our existence mobile is a big theme.

BI: Are there any investments in the works at the
moment?

JH: We've got a lot in the works but unfortunately we can't talk
about those that we haven't yet announced.

We're seeing quite a lot. In general terms, there probably hasn't
been a better time to be an entrepreneur. It used to be harder to
start a company because you didn't have access to large customer
bases that you can now address through the app store, for
example.

The world is very connected, so whereas European companies set up
10 years ago would focus on their own market, and the same thing
for the US, now companies go global very fast.

I would add that if you're starting a company you don't need to
'own' all of your product. You don't need to have an IT person,
you don't even need to have servers, you don't need to have your
own email. For those things there are Gmail, Dropbox — there are
tools.

BI: Are you guys facing more competition to get into
deals?

JH: Clearly we are very humble and we always think of
competition. We don't take opportunities for granted. For that
reason we're present in multiple European cities, the type of
investors we have at Index speak different languages, we spent
time on the ground.

We also do things like invest cross-stage rather than saying, "We
only invest in companies when you achieve X million pounds in
revenue." On the contrary. We track them from the time they're
born and invest from seed to late stage growth. So we do a lot of
things to make sure we're there for entrepreneurs.

BI: There seem to be more US funds looking to Europe now?
Are you having to work harder to get the deals?

JH: There are two components of the answer.

One, in a way it's great to see US funds come to Europe because
it's a validation of the opportunity. 10 years ago we wouldn't
have seen that and the reason why we're seeing that now is
because European companies truly go global from the get go.

Clearly there are a number of sectors and themes where
Europe has the cutting edge — I would call it thematic expertise.
Go back to fintech, this is why I spent the vast majority of my
time on fintech, it's because the ecosystem here is very fertile.

You've got a lot of the old players here, you've got willing and
cooperate regulators, you've got capital for startups, you've got
people with entrepreneurial spirit, and you've got people with
qualifications in that sector.

The second part is more on a firm to firm competition level. This
is our backyard and, therefore, backing a European entrepreneur
is a key priority for us. For the folks you're referring to,
investing on an incidental basis in maybe one or two, maximum 3,
companies in Europe, for them it's a nice to have.

Very often we invest in a Series A and then a US firm comes in at
Series B or C. That's great! It's a both a validation and [the
company] gets better access to the US.